Creditor Insurance vs Mortgage Protection

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There is a difference between creditor insurance, which the bank requires when one purchases a mortgage, and mortgage protection, which a life insurance agent offers to cover the mortgage in the event of the death of the mortgagee.

The bank owns the creditor insurance and requires it to ensure the mortgage will be paid.  The bank would name themselves as the beneficiary and they have complete control of the policy.  Life insurance, on the other hand, is owned by the mortgagee and the mortgagee has complete control over the policy.

When the mortgage expires or the bank cancels the mortgage, the coverage ends.  However, the life insurance company would never cancel the policy, as long as premiums are paid.  The coverage could continue after the mortgage is paid.

A mortgagee can choose a higher amount of insurance over and above the mortgage, including a level death benefit.  The mortgagee can also choose other benefits and features to add to the mortgage protection policy.   The benefit amount for the creditor insurance, however, decreases as the mortgage is paid off.  When the health changes, there are limitations placed on the coverage, and it cannot be customized to meet other financial needs.

In conclusion, the mortgage insurance offered by a life insurance agent is more expansive and flexible than the creditor insurance available at the banks.

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